Receiving social feedback such as praise or blame for one's character traits is a key component of everyday human interactions. It has been proposed that humans are positively biased when integrating social feedback into their self-concept. However, a mechanistic description of how humans process self-relevant feedback is lacking. Here, participants received feedback from peers after a real-life interaction. Participants processed feedback in a positively biased way, i.e., they changed their self-evaluations more toward desirable than toward undesirable feedback. Using functional magnetic resonance imaging we investigated two feedback components. First, the reward-related component correlated with activity in ventral striatum and in anterior cingulate cortex/medial prefrontal cortex (ACC/MPFC). Second, the comparison-related component correlated with activity in the mentalizing network, including the MPFC, the temporoparietal junction, the superior temporal sulcus, the temporal pole, and the inferior frontal gyrus. This comparison-related activity within the mentalizing system has a parsimonious interpretation, i.e., activity correlated with the differences between participants' own evaluation and feedback. Importantly, activity within the MPFC that integrated reward-related and comparison-related components predicted the self-related positive updating bias across participants offering a mechanistic account of positively biased feedback processing. Thus, theories on both reward and mentalizing are important for a better understanding of how social information is integrated into the human self-concept.